THE TRANSATLANTIC ECONOMY 2021 Annual Survey of Jobs, Trade and Investment between the United States and Europe Daniel S. Hamilton and Joseph P. Quinlan Hamilton, Daniel S., and Quinlan, Joseph P., The Transatlantic Economy 2021: Annual Survey of Jobs, Trade and Investment between the United States and Europe Washington, DC: Foreign Policy Institute, Johns Hopkins University SAIS/Woodrow Wilson Center, 2021. © Foreign Policy Institute, Johns Hopkins University SAIS/Woodrow Wilson Center, 2021 Foreign Policy Institute The Paul H. Nitze School of Advanced International Studies The Johns Hopkins University 1717 Massachusetts Ave., NW, 8th floor Washington, DC 20036 Tel: (202) 663-5880 Fax (202) 663-5879 Email: [email protected] www.transatlanticrelations.org Woodrow Wilson International Center for Scholars Global Europe Program One Woodrow Wilson Plaza 1300 Pennsylvania Avenue, NW Washington, DC 20001-3027 Tel: (202) 691-4000 Email: [email protected] www.wilsoncenter.org American Chamber of Commerce to the European Union (AmCham EU) Avenue des Arts/Kunstlaan 53 1000 Brussels, Belgium Tel: +32 2 513 68 92 Fax: +32 2 513 79 28 Email: [email protected] www.amchameu.eu Twitter: @AmChamEU U.S. Chamber of Commerce 1615 H Street NW Washington, DC 20062, USA Tel: +1 202-659-6000 Email: [email protected] www.uschamber.com Twitter: @USCC_Europe ISBN 978-1-947661-10-3 THE TRANSATLANTIC ECONOMY 2021 Annual Survey of Jobs, Trade and Investment between the United States and Europe Daniel S. Hamilton and Joseph P. Quinlan Paul H. Nitze School of Advanced International Studies, Johns Hopkins University Woodrow Wilson International Center for Scholars Table of Contents ii Key Findings iv Preface and Acknowledgements v Executive Summary 1 Chapter 1: Time to Heal: The Transatlantic Relationship in 2021 15 Chapter 2: Jobs, Trade and Investment: Enduring Ties that Bind 31 Chapter 3: The United States, Europe and China: Different Now, But Changing Again 41 Chapter 4: The Digital Acceleration 59 Chapter 5: The 50 U.S. States: European-Related Jobs, Trade and Investment 71 Chapter 6: European Countries: U.S.-Related Jobs, Trade and Investment 85 Appendix A: European Commerce and the 50 U.S. States: A State-by-State Comparison 137 Appendix B: U.S. Commerce and Europe: A Country-by-Country Comparison 172 Notes on Terms, Data and Sources 174 About the Authors i - THE TRANSATLANTIC ECONOMY 2021 THE TRANSATLANTIC ECONOMY 2021 16 million jobs on both sides of the Atlantic Half of total global personal consumption $6.2 trillion in total commercial sales a year One third of global GDP (in terms of purchasing power) ii - THE TRANSATLANTIC ECONOMY 2021 Thriving Together No two other regions in the world are as deeply integrated as the U.S. and Europe Digital Innovation of digital content is R&D spending 75% produced in North U.S. affiliate R&D in America and Europe $33 billion Europe (2018) $45 billion European affiliate more data flows via R&D in the U.S. (2018) 55% transatlantic cables than over transpacific routes Investment Jobs 64% of global investment Workers into the U.S. comes 4.9 million U.S. companies in Europe from Europe (2019) (Direct jobs due to investment, 2019) 5 million European companies in 60% of U.S. global investment goes to Europe (2019) the U.S. (Direct jobs due to investment, 2019) Trade in goods Trade in services $466 billion U.S. goods imports $345 billion U.S. to Europe from the EU + UK (2020) (2019) $291 billion U.S. goods exports $245 billion Europe to the U.S. to the EU + UK (2020) (2019) iii - THE TRANSATLANTIC ECONOMY 2021 Preface and Acknowledgements This annual survey offers the most up-to-date picture of the dense economic relationship binding European countries to America’s 50 states. The survey consists of six chapters. Chapter One underscores how the transatlantic economy today is structurally sound yet buffeted by considerable political uncertainties. Chapter Two updates our basic framework for understanding the deeply integrated transatlantic economy via “eight ties that bind.” Chapter Three compares transatlantic commercial relations with those the Atlantic partners have with China, including how Daniel S. Hamilton Joseph P. Quinlan supply chains are being transformed. Chapter Four explores the transatlantic digital economy, which in many ways has become the backbone of commercial connections across the Atlantic. Chapter Five offers an overview of European commercial ties with the United States, and Chapter Six an overview of U.S. commercial relations with Europe. The appended charts provide the most up-to-date information on European-sourced jobs, trade and investment with the 50 U.S. states, and U.S.-sourced jobs, trade and investment with the 27 member states of the European Union, as well as Norway, Switzerland, Turkey, and the United Kingdom. This annual survey complements our other writings in which we use both geographic and sectoral lenses to examine the deep integration of the transatlantic economy, and the role of the U.S. and Europe in the global economy, with particular focus on how globalization affects American and European consumers, workers, companies, and governments. For this year’s survey, we have opted for a fresh new visual concept. This concept takes a variety of landscapes from the U.S. and Europe, and merges them together. The aim of the concept is to highlight the similarities between the two sides of the Atlantic, which is analogous to our shared history, culture and values, as well as the deep economic ties reported in the study. We would like to thank Thibaut L’Ortye, Wendy Lopes, Nick Pawley and Garrett Workman for their assistance in producing this study. We are grateful for the generous support of our annual survey from the American Chamber of Commerce to the European Union (AmCham EU), the U.S. Chamber of Commerce and their member companies, as well as the American Chambers of Commerce in Denmark, Finland, Ireland, Slovenia and Sweden. The views expressed here are our own, and do not necessarily represent those of any sponsor or institution. Other views and data sources have been cited, and are appreciated. iv - THE TRANSATLANTIC ECONOMY 2021 Executive Summary • Despite transatlantic political turbulence and the • Intra-firm trade also accounted for 39% of U.S. COVID-19-induced recession, the U.S. and Europe exports to Europe and 56% to the Netherlands, 37% remain each other’s most important markets. The to Germany and 32% to France. transatlantic economy generates $6.2 trillion in total commercial sales a year and employs up to 16 million The U.S. in Europe workers in mutually “onshored” jobs on both sides of the Atlantic. It is the largest and wealthiest market in • Over many decades no place in the world has the world, accounting for half of total global personal attracted more U.S. FDI than Europe. During the past consumption and close to one-third of world GDP in decade Europe attracted 57.3% of total U.S. global terms of purchasing power. investment – more than in any previous decade. • Ties are particularly thick in foreign direct investment • Measured on a historic cost basis, the total stock of (FDI), portfolio investment, banking claims, trade U.S. FDI in Europe was $3.6 trillion in 2019 – 60% of and affiliate sales in goods and services, mutual R&D the total U.S. global investment position and almost investment, patent cooperation, technology flows, four times U.S. investment in the Asia-Pacific region. and sales of knowledge-intensive services. • The pandemic-induced recession caused U.S. FDI Transatlantic Investment: Still Driving flows to Europe to vanish, from $344 billion in 2019 the Transatlantic Economy to roughly $0 in 2020. This sharp swing in global FDI to Europe, however, was mainly driven by large • Trade alone is a misleading benchmark of international divestments and negative intra-company loans in the commerce; mutual investment dwarfs trade and is Netherlands and Switzerland (-$150 billion and -$88 the real backbone of the transatlantic economy. The billion FDI flows respectively). Given their one-off U.S. and Europe are each other's primary source and nature, we expect the recent investment declines to destination for foreign direct investment. be temporary. FDI inflows to Europe should bounce back to positive territory in 2021. • Together the U.S. and Europe accounted for 27% of global exports and 32% of global imports in • 2018 and 2019 were atypical years as U.S. companies 2019. But together they accounted for 64% of the repatriated a large amount of foreign earnings outward stock and 61% of the inward stock of global that had been accumulating overseas, in large part FDI. Moreover, each partner has built up the great because of 2017 changes to U.S. tax law. As a result, majority of that stock in the other economy. Mutual holding companies in Europe saw negative U.S. investment in the North Atlantic space is very large, outflows of $47 billion in 2019 while positive FDI of dwarfs trade, and has become essential to U.S. and $56 billion flowed to all other industries in Europe, European jobs and prosperity. resulting in net U.S. FDI flows to Europe of $8 billion in 2019. • European firms based in the U.S. accounted for 57% of the $395 billion in U.S. exports by U.S.- • In the first three quarters of 2020, however, U.S. FDI based foreign affiliates in 2018. German companies outflows to Europe increased to $55 billion, once exported $50 billion from the U.S. in 2018. again accounting for roughly half of U.S. global outflows. U.S. outflows to the Asia-Pacific region • U.S. foreign affiliate sales in Europe of $3.4 trillion during the first three quarters of 2020 declined in 2019 were greater than total U.S.